Merck KGaA generics unit eyed by many – reports

08 March 2007 09:11  [Source: ICIS news]

SINGAPORE (ICIS news)--Merck KGaA’s offer to sell its generics business has drawn interest from several parties, and indicative bids to the German pharmaceutical and chemical major are said to be due on Monday, media reports said.

Citing anonymous sources close to the deal, Financial Times Deutschland and Reuters on Thursday have named at least five private equity firms and five pharmaceutical companies to be in the race to buy Merck Generics, which raked in sales revenues of €1.8bn ($2.4bn) in 2006.

The companies were not immediately available for comment.

Merck first announced its intention to divest the generics business in January 2007, in a bid to focus on high-margin branded pharmaceuticals and chemicals, and to reduce the debt it incurred through acquiring Swiss biopharmaceuticals company Serono for $13.3bn in September last year.  

The Serono group posted an 18.4% fall in its fourth-quarter operating profit to $134m (€102m) earlier this month.

Private equity firm Carlyle was the latest party reported to be eyeing the unit, along with joint bidders in the investment line, Bain Capital and Apax Partners, as well as Kohlberg Kravis & Roberts and Warburg Pincus.

Pharmaceutical companies have also joined in the fray, with US-based Mylan Laboratories, Israel’s Teva Pharmaceutical Industries and India’s Dr Reddy’s Laboratories being singled out by the reports. French newspaper La Tribune had previously suggested that Sanofi-Aventis was also interested in the purchase.

Among those who have made their buying intentions open are India’s Ranbaxy Labs and Iceland’s generics producer Actavis.

"The high cost of acquisitions in our business only pays off if a consolidation of both firms could achieve clear savings in markets and business segments," Robert Wessman, chief executive of Actavis, was quoted to be saying by the German newspaper.

"From experience, private equity firms enter very aggressively into the bidding process, but withdraw at the high price level of the deals," he added.

Meanwhile, Merck’s chief financial officer Michael Becker was said to be expecting €5bn from the sale of the unit, though buying intentions were reported to just exceed the €4bn mark.

Merck Generics has bases in Australia, France and Scandinavia, and operates in other countries like the US, Brazil and South Africa.

($1 = €0.76)

By: Keith Tan Liming
+65 6780 4359

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